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Jacob is buying a house. He has a 25% down payment. The house he wants to buy is

$455,000. He qualifies for a 30 year fixed rate mortgage at 3.95%. (LEVEL 3)
How much is Jacob's monthly mortgage payment?
How much total interest will he pay at the end of 30 years?

If Jacob pays this house off 10 years early, how much will he save in interest? (LEVEL 4)

User Moin Moin
by
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1 Answer

1 vote

Final answer:

Jacob's monthly mortgage payment is approximately $1,617.56. He will pay a total of $241,671.60 in interest over 30 years.

Step-by-step explanation:

To calculate Jacob's monthly mortgage payment, we first need to determine the loan amount. Jacob has a 25% down payment on a house that costs $455,000, so the loan amount would be 75% of the house price. Loan amount = $455,000 x 0.75 = $341,250.

Next, we need to calculate the monthly interest rate. The annual interest rate is 3.95%, so the monthly interest rate would be 3.95% divided by 12. Monthly interest rate = 3.95% / 12 = 0.3292%.

Using an amortization formula, we can calculate the monthly mortgage payment. Mortgage payment = Loan amount x (monthly interest rate / (1 - (1 + monthly interest rate)^(-number of months))). Plugging in the values, we get: Mortgage payment = $341,250 x (0.3292% / (1 - (1 + 0.3292%)^(-360))). The result is approximately $1,617.56 per month.

To calculate the total interest Jacob will pay at the end of 30 years, we subtract the loan amount from the total cost. Total interest = Total cost - Loan amount. Total cost = $1,617.56 x 360 months = $582,921.60. Total interest = $582,921.60 - $341,250 = $241,671.60.

User Almudena
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8.2k points